Singapore Property: Slower decline in property prices + Second residential site triggered for launch

Slower decline in property prices. Last Friday, URA released the statistics for the Singapore property market in 2Q09. The figures came in better than the flash estimates released earlier this month. Property prices declined less rapidly in 2Q09, dropping by 4.7% QoQ. Mass market properties in the Outside Central Region (OCR) continued to outperform as prices fell by just 2.6% QoQ in comparison to the 6.6% and 6.3% decline in prices in the Core Central Region (CCR) and Rest of Central Region (RCR). This was aided by the resilience in HDB resale prices which gained 1.4% QoQ in 2Q09, on the back of a 58% jump in transaction volume to 10,184 units. Transaction volume in private properties had also picked up strongly in 2Q09, with increases in primary, subsale and resale volume. In the rental market, vacancy rate remained stable at 5.9%.

We believe that strength in the property market was due to 2 key factors - 1) pent-up demand after primary transaction volume reached a decade low in 2008 and 2) resilience in HDB prices. Low interest rates may have played a role as well.

Positive outlook for retail segment; office segment remains weak. In the office market, rents fell by a slower 7.7% QoQ in 2Q09 but vacancy rate increased to 10.8% due to increasing supply and decreasing demand for office space. There was also no significant change in the oncoming supply of office space in the pipeline. In the retail segment, outlook is more positive as rents fell by a smaller 2% QoQ in 2Q09 and occupied shop space increased sharply by 247,570 sq ft in 2Q09 (vs 10,764 sq ft in 1Q09). Although vacancy rate increased from 6.6% to 7.5%, this was due the lag time taken for tenants to retrofit and move into newly completed malls like ION Orchard and Orchard Central.

According to Urban Redevelopment Authority, the tender for a 99-year leasehold residential site at Dakota Crescent in the government's reserve list has been triggered for launch with a developer undertaking the minimum bid price of S$130m or S$200 psf ppr. The bid price is 62% below $524 psf ppr paid in Jun 2007 for the Dakota residences site next to it. Market expects the top bid around S$350 psf ppr range. This is the second residential site triggered for launch within a week after the 99-year leasehold residential site at Chestnut Avenue in the government's reserve list that was triggered for launch with a developer undertaking the minimum bid price of S$62m or S$120.8 psf ppr.


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